20 May 2007

Two welfare systems

"In reality we have not one but two welfare systems.", writes Paul Hawken in the Ecology of Commerce, "The first is meager, consisting of aid to the unemployed, dependent children, the poor and helpless. It is seen as charity, a hand-out, a grudging acceptance of social responsibility, but it is almost always accompanied by judgment, adminishments of failure, and a high moral tone. The second welfare system is large, expansive, and expensive. It comes in the form of large government grants and programs for building highways, subsidies to the rich in the form of interest payment deductions on their houses, giveaways of timber and mining rights on government lands, government-financed research in universities, revolving-door policies between the dense industry and government resulting in expensive, poorly planned procurement policies and so on. The list of recipients of these handouts from the government is long, but they are not seen as recipients of welfare. However, the fact is that three times as much housing subsidy goes to the top fifth of the population as to the bottom 20 percent who need it most."

The other crucial difference between the two welfare systems is transparency. The first is quite open, with assistance rates (rightly) widely published and accessible to all. The other is largely hidden from public view. That's why the work done, for instance, by farmsubsidy.org is especially valuable: it uses freedom of information law to force European governments to release detailed data on who gets what from Europe's €55 billion Common Agricultural Policy. And it puts this data online. Also interesting is the OECD's work on environmentally harmful subsidies, and research done by Good Jobs First (see this about subsidies to Wal-Mart, the world's largest corporation).

Transparency is one of the big advantages of a Social Policy Bond regime: it is built in right from the start. Under a bond regime, you might get public support for large corporations, wealthy landowners, corrupt construction companies or the organized criminals who benefit so much from complex regulations enacted by big government. You might even get generous public support, though I think it unlikely. But if that were the case, the people giving their tax dollars to the wealthy and corrupt would be doing so knowingly, not, as at present, because the hidden part of our current welfare system is based on deception.

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Social Policy Bonds

See the Social Policy Bonds website for overviews and links to articles, papers, news and more about Social Policy Bonds. Click on the image below to download a 2400-word article, published by the Institute of Economic Affairs, London.

Social Policy Bonds in 2400 words

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Social Policy Bonds in the media

9 October 2015: An article by Greg Bearup on the genesis of the Social Policy Bond idea, and application of a version of it in Australia appears in the Weekend Australian Magazine. (The article can also be downloaded as a pdf from here.)

October 2013: Professor Robert Shiller of Yale University, is named as one of the three winners of the 2013 Nobel Prize in Economics. His Nobel Prize lecture (pdf) delivered on 8 December, mentions Social Policy Bonds. Professor Shiller has for many years encouraged my work on Social Policy Bonds, beginning in late 1996 when he sent me this letter.

3 May 2012: An audio talk by Nobel Prize winner Professor Robert Shiller at the London School of Economics, in which Social Policy Bonds are briefly mentioned, is available here.